Existing schemes reign over new MF offers

NFOs were only a quarter of the Rs 50,000-cr inflow in past 12 months

Despite a record number of new offers, existing schemes remain the preferred choice of mutual fund (MF) investors. Of the total incremental flows in the past 12 months, barely a quarter went into New Fund Offers (NFOs).

Of the Rs 50,000 crore of equity inflows in 2014, around Rs 12,200 crore was channelled through NFOs. This was despite a slew of new offerings from marquee fund houses, such as ICICI Prudential AMC, Birla SunLife AMC, Reliance MF and Sundaram MF.

The trend is also in contrast to the previous bull market. Between 2005 and 2008, NFOs were the preferred choice for investors. A total of 171 new offers managed to garner Rs 1.12 lakh crore during this period.

Sundeep Sikka, chief executive officer (CEO), Reliance MF, said: “Investors are more mature than in the past. They take informed decisions. Though NFOs are the flavour of the season, investors look for record, brand and returns.”

He said the rising popularity of Systematic Investment Plans was also an indication that investors are savvier. Awareness and investor education has played a role in this, say those in the sector.

For instance, many investors earlier got lured to NFOs due to the low Net Asset Value on offer. “Investors are fast realising there is no difference if one buys MF units at Rs 10 or at Rs 100 at a given point of time. The returns made always need to be looked in percentages and not in absolute terms,” said a senior official with a large fund house.

Dhirendra Kumar, CEO, Value Research, said: “Many investors are not buying the NFO story. The majority is investing in existing schemes.”

As of end-December, there were 408 equity schemes offered by fund houses. A little over half had been in operation for over five years.

Jisang Yoo, CEO, Mirae Asset (India), one of the very few fund houses that didn’t launch any NFOs last year, says it has managed to double the number of investors in its existing schemes, on the back of performance.